Sarasota's police pension liability mounts

Saturday

Jul 27, 2013 at 3:39 PM

Sarasota Police costs account for more than 50 percent of the city's general fund budget.

By JESSIE VAN BERKELjessie.vanberkel@heraldtribune.com

As city leaders prepare next year's budget and consider the hundreds of millions of dollars in unfunded pensions and benefits promised to retired employees, several mention Detroit's recent bankruptcy filing.

News stories since the Chapter 9 filing have noted how other cities are poised to follow in the Motor City's financial footsteps and the role of pension obligations in Detroit's problems.

Most officials here are quick to focus on the differences and positives in Sarasota's situation: Sarasota has a partially funded pension system instead of pay-as-you-go, and it did not dip into its reserves to balance the budget this year.

Then there was the mayor.

“Make no mistake, we are Detroit. We are just 10 years out,” Mayor Shannon Snyder said. “It's not a question of if we go bankrupt — it's just a question of when and how.”

Other commissioners have called Snyder's “we are broke” refrain irresponsible and an exaggeration.

“When you can't afford to pay your payroll, when you're in the situation Detroit's in, when you can't afford to turn your streetlights on — then you're broke,” Commissioner Paul Caragiulo said. “Are we there? No. But you can't coast.”

The elected officials agree the mounting cost of the city's unfunded pension liability, estimated between $295 million and $376 million, is shocking and must be addressed to afford the promises — many of which were made to police officers.

The question remains, how?

The city is negotiating with the police union. Commissioners and police anticipate another round of contentious pension debates.

A diminished tax base and investments slammed by the Great Recession have left Sarasota struggling to cover expenditures, which have grown by $14.9 million since last year and now total $191 million.

Pension costs account for about $3 million of the increase.

Other significant expenses include $3.4 million for new police cars and radios, $3 million for shoreline repair from Tropical Storm Debbie and $4.3 million for water and sewer upgrades and a new garage transfer station.

While property tax revenue is projected to increase almost $17 million — up from $16.2 million this year — and revenue from red light cameras is expected to nearly double to $1.9 million, the city was still left with a $3.4 million budget deficit for the next fiscal year.

To fill the gap, commissioners have proposed increasing property taxes by 8.5 percent and using some one-time funding sources.

They also plan to cut 11 staff positions through attrition, including nine police jobs.

City budget documents show police costs make up more than 50 percent of the city's general fund expenditures.

For every dollar the city pays an officer, 81 cents goes toward pension plans, Finance Director John Lege said.

“It's higher than I've seen at other places,” Lege said.

Snyder said retirees have called him, scared, wondering what would happen to their pension and benefits if the city were to go bankrupt. He said he has told them they would lose 25 to 30 percent of what they were promised.

Snyder said that the thought of people spending decades working for the city, and then not getting what they counted on plagues him more than anything else.

He favors disbanding the Sarasota Police Department and having the Sheriff's Office oversee the city. The other commissioners do not support the idea.

It would still leave the city on the hook for what it has promised employees and retirees, Commissioner Susan Chapman said.

Chapman was elected in May. During her campaign she suggested moving police from the current pension plan to a 401(k)-style plan, an idea she still supports.

“What we have to do as a city is decide: Do we want city services or do we want to become a pension plan?” Chapman said.

The local union rejected Chapman's suggestion.

“The idea of asking men and women to sacrifice their life in return for a 401(k) is completely unacceptable,” said Sgt. Mick McHale, president of the Sarasota Police Benevolent Association.

Sarasota residents are accustomed to a certain level of protection and are willing to pay for it, he said.

During the last pension battle, which lasted three years, ending in 2012, police and their supporters filled the commission chambers to protest the commission's consideration of major cuts to their pensions.

“It was very intimidating, and to stand up to that is really hard. And of course all of us want to be generous with our employees. But we also have stewardship to the public,” Chapman said. “It comes down to: Do you have the political will to do what is necessary?”

Across the nation, municipalities are reworking their retirement benefits for employees. Organizations such as the Center for State and Local Government Excellence and the Florida League of Cities have focused on the topic in presentations and reports.

Sarasota has at least $296 million in unfunded liabilities.

Those are the pension, health care and other benefits promised to retired employees — including firefighters, general employees and police — that the city does not have money to cover.

Depending on the assumed rate of return on investments used when calculating the unfunded liabilities, the city could be responsible for much more — around $376.5 million, according to the city's most recent financial report from last September.

Some commissioners said the second estimate, which uses a 6 percent rate of return on investments, is closest to the truth.

McHale said the calculation change makes the situation look more dire.

He pointed to the police pension reforms that took effect in October, when numerous changes were made to save the city money at law enforcement's expense.

“We think modifications were made and the system, the fund, is starting to enjoy a positive rate of return,” McHale said, adding the group is willing to work more with the city on the issue.

Former commissioner Terry Turner, whose term ended in May, was a driving force behind the changes to police benefits last year.

The former bank executive previously taught economics and finance at the University of California, Berkeley. Before he left the commission he gave a half-hour speech on the city's options for the coming year's budget — which commissioners have since referenced several times.

Turner identified how to cover expenses, including managing police and services more efficiently, modest increases to the millage rate and consolidating services. In the end, he warned the city must restructure employee benefits.

“There's no other way to go other than trying to fix it,” he said. “It's a serious conversation, and all of your policy decisions ought to reflect the seriousness of that issue.”

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